Suppose you have a loved one with special needs. Should your estate plan be any different? If you leave them your entire estate through a will, it may disqualify them from receiving medical benefits since their assets could be more than the limit set by the government.
Fortunately, there is a way you can skirt around these regulations – through a special needs trust. This type of trust works by providing for your loved one without affecting their eligibility for government support programs such as Medicaid.
Setting up the trust
Once you establish a trust, you need to fund it. Special needs trusts are no different, and you can put different kinds of assets into the trust. However, in a special needs trust, the proceeds to the beneficiaries are structured differently to avoid affecting their eligibility for support programs.
For instance, trust proceeds are usually used for medical expenses, transport costs, payments to caregivers, or other financial needs not covered by public assistance payments. In most cases, proceeds cannot be used for expenses like food or rent since that could affect your loved one’s eligibility for public assistance.
Remember, a special needs trust is irrevocable. Not even the person who set it up or the beneficiary can alter its terms. Legally, this offers some asset protection since creditors cannot repossess trust assets to recover money owed by the beneficiary.
Making the right choice
If you have a loved one with special needs, you ought to align your estate plan accordingly. Otherwise, your loved one may pay a heavy price.
It is advisable to understand how trusts work before setting up one for them. It will help you make the best choice that will protect your loved one’s interests long after you are gone.